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insurance claims analysis

Contributor(s): Matthew Haughn

Insurance claims analysis is the inspection and judgment of merit in the requests for coverage of incidents by insurance customer claims.

Insurance claims handlers perform analysis to decide which claims are valid -- and eligible for payout --and which may be fraudulent. Cases of potential fraud are referred to a special investigations unit (SIU) for further scrutiny.

The information a claims handler uses to judge a claim includes data about the incident and the claimant’s current coverage and history. Within an insurance provider’s own systems, the history visible to an agent may be limited to the claimant’s past with that provider.

When referred to an insurer’s SIU, a claim may be inspected through case tracking software systems. These systems have advanced in recent years and able to process a higher numbers of cases, including those with additional complexity. The software can be fine-tuned to distinguish between opportunistic individual fraud and larger scale, organized fraud rings.

Suspect claims can be detected more quickly by tracking recognized suspicious indicators through first notification of loss (FNOL) systems. Enhanced billing analytics can help isolate cases of inflated claims. However, these systems are still generally limited to an individual insurance provider’s silo of data, a limitation that can make it possible for an individual to defraud multiple insurers with the same scam.

Some providers use collaborative or third-party systems that show claims from multiple providers, enabling a complete picture of a given claimant’s behavior. These collected, collaborative systems can use predictive analytics to prevent false claims and fraud. ISO Claim Search, for example, has over 800 million claim records that insurers can use to gather valuable data.

As profit margins are dwindling and natural disasters are becoming more frequent, insurance companies are pressured to find any possible inefficiency to higher coverage demands and offset lower net profits. Insurance companies estimate that 10-25% of all claims contain some element of fraud. Use of newer fraud prevention methods can help raise the low 1% of claims investigated by SIU, improving the rate of which fraud is caught. Better systems also reduce the number of false flags and minimize any negative impact on customer service.

This was last updated in June 2017

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